USD/JPY Price News: Yen Surges to Weekly Highs as “Takaichi Rally” Shakes Forex Markets

The USD/JPY exchange rate is facing strong selling pressure this Wednesday, dropping below 153.40 as the Japanese Yen benefits from clearer domestic politics and a weaker U.S. dollar. The pair is down almost 0.9% today, adding to a sharp 3% decline since Monday’s post-election high.

The “Takaichi Mandate”: From Deficit Fears to Fiscal Reality

The main reason for the Yen’s recent strength is Prime Minister Sanae Takaichi’s big election win on February 8. At first, markets worried her “reflationist” views could cause a debt crisis, but now the focus has shifted to stable policies.

• The Two-Thirds Supermajority: The LDP’s historic win with 316 seats gives Takaichi strong support for her “Three Pillars” agenda: relief, defense, and growth. She can now move forward without needing to make coalition deals.

• Fiscal Responsibility: The Takaichi Cabinet has stressed reducing the debt-to-GDP ratio and taking a careful approach to currency monitoring. These comments have eased worries about excessive bond issuance.

• A “Sell the Rumor, Buy the Fact” Move: After six days of losses before the election, traders are now closing short-yen positions as political uncertainty fades. This is a classic example of “sell the rumor, buy the fact.”

Central Bank Divergence: BoJ Eyes 1.00% as Fed Softens

The long-standing “yield gap” that has hurt the Yen is starting to close. As of February 11, the policy outlooks for Japan and the U.S. are moving in different directions:

1. Bank of Japan (BoJ): The Bank of Japan raised rates to 0.75% in December and may increase them again to 1.00% as soon as March. Board member Kazuyuki Masu recently said that “timely and appropriate” hikes are needed to control inflation caused by imports.

2. The Federal Reserve: After weaker U.S. retail sales and job data, swap markets now see a 15-20% chance of a rate cut in March. This “dovish tilt” is making the Dollar less attractive for carry trades.

USD/JPY Technical Forecast: 152.00 Support in the Crosshairs

On the 4-hour chart, falling below the 155.50 support level has weakened the short-term bullish trend.

Key Levels to Monitor:

• Bearish Target ($152.12): This is the recent swing low. If the price closes below this level for the day, it could quickly drop toward the key 150.00 level.

• Dynamic Resistance ($154.55): What was once support is now resistance. The price needs to move back above this level to stop the current downward trend.

• The “Line in the Sand” ($160.00): The $160.00 level is seen as a key threshold. Although the pair is well below this point, ongoing warnings from the Finance Ministry continue to discourage those betting on the Dollar.

High-Stakes Catalyst: Today’s NFP Double-Feature

The next move for USD/JPY depends on the Non-Farm Payrolls (NFP) report, which comes out today at 8:30 a.m. ET.

The NFP Scenario: If the NFP report is weak (below 50,000) or if there are big downward changes to 2025 data, USD/JPY could fall quickly toward 151.28. On the other hand, a strong report (200,000 or more) could trigger a sharp rebound toward 156.00.